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The acceleration in smartphone price erosion that set in during 2013 has already caused major headaches for companies like , BlackBerry and . But much worse is to come when launches its first mid-market device this fall. Many second-tier vendors are particularly vulnerable now because they have just priced their new autumn models ambitiously, expecting strong demand for $400 models. Instead, the market is bifurcating - Apple and Samsung still have traction in the $600-plus category, while vendors like , Micromax, Huawaei and Karbonn are getting triple digit growth rates for their sub-$200 smartphones.

The $400 price point is already in real trouble - and going will get much tougher if Apple's new value iPhone is priced at or below $350 in retail as expected. The budget iPhone is likely to cost $0 with a two-year contract, while the high-end iPhone continues to cost $200 on contract. That is a major problem for many vendors who have been making bizarrely ambitious pricing decisions.

After disappointing sales of high-end Z10 and Q10, BlackBerry opted to price the Q5 value model above $400. After disappointing sales of the high-end HTC One, HTC opted to price the HTC One Mini at around $500. Samsung has a vibrant low-end range, but it also decided to price the Samsung Galaxy S4 Mini at $500.

Taken together, these design and pricing decisions seem wildly optimistic. These "value" models don't offer high-end features of true luxury phones, but are still priced well above the new smartphone average ASP, which is $375 and dropping rapidly. The middle market is no longer located at the $400-500 range that all these smartphone vendors are still crowding into. Add the absurdly optimistically priced Moto X by and certain LG, Nokia and Sony mid-range models... and we have an explosive cocktail ahead of Apple's move to a lower price tier.

Of course, Apple has been selling older iPhones at or below $400 non-subsidized price for years; but a completely new model backed up with a marketing blitz is going to be a different kettle of fish. The defining feature of the phone market in 4Q 2013 may be the coming carnage in the $400-500 price bracket.